The US economy is wobbling like an emotional teenager with confidence issues. Consumer confidence fell to 25.0 from 37.4 in January; the reading was expected at 35.0 with the main causes being put down to the ever increasing unemployment problem and a lack of chutzpah from the inhabitants of Capitol Hill. This was not the only piece of negative data as the Case-Shiller house price index showed a 2.5% decline in house prices over US metropolitan areas in the past month which pushed the year on year figure to a record -18%. Richmond Manufacturing was also lower.

With the negative data risk returned to the market like an old girlfriend and sterling started to, as we expected, lose some of its lustre. The market may punch GBP lower in the coming days as momentum shifts to its competitors as, after all, has become a bit wet over recent sessions. Although European data was weak with an unexpected fall in the German IFO business climate EUR managed to stem losses against both GBP and USD.

Ben Bernanke’s testimony to the Senate Banking Committee would have been no more sombre if there was a coffin on display and ‘Auld Lang Syne’ was sang between warnings of a slow recovery. Equity markets enjoyed a bounce however as the Fed Chairman seemed to rule out bank nationalisation in the short term with US markets gaining on average around 3%. More of the same can be expected when he sits before the members of the House of Representatives today

Apart from Act II of Ben Bernanke’s testimony it is a fairly light day although what is due is key and could precipitate that move lower that we expect on GBP. UK GDP for the 4th quarter is due at 09.30 while its German equivalent has already printed an on estimate figure of 1.7% year on year.

Further analysis is of course always available at our video blog http://uk.youtube.com/user/WorldFirstJC

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

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